Housebuilder's profits drop by 96%

Sunday 27 January 2008 00:08 BST

The UK's biggest housebuilder has racked up half-year losses of £1.54 billion after market turmoil caused it to slash the value of its land bank.

Taylor Wimpey reported the deficit for the six months to June 30 after writing off £586 million from its UK land portfolio - around 16% of the total - as well as more than £816 million linked to goodwill recognised from the merger between Taylor Woodrow and George Wimpey last year.

In another picture of the impact from the housing market downturn, the firm's underlying profits plunged 96% to £4.3 million during the period, with house sales down nearly a third.

Rivals Persimmon and Bovis Homes have also revealed massive half-year profit slumps as the industry grapples with a mortgage squeeze and battered consumer confidence.

Taylor Wimpey, which is labouring under a £1.7 billion debt mountain as well as the housing market woes, added it was still trying to secure breathing space from its lenders, with a deal expected to be finalised by the year end.

The group faces breaching its banking covenants - which measure how well placed the firm is to repay the debt - because of its poor results, and investors were hoping to see new arrangements unveiled on Wednesday.

But chief executive Pete Redfern said discussions with banks were ongoing.

Mr Redfern added that he was not expecting to have to raise new capital in order to strike a deal with lenders, which comprise a range of banks and US private investment firms. The group failed in a bid to raise a reported £500 million last month to help shore up its finances.

With Taylor Wimpey's total house sales down nearly 31% to 8,494 during the "very challenging conditions" of the first half, Mr Redfern said the other main focus of the business was on improving the business's cashflow.

To help its cash position, he has cancelled the firm's interim dividend payment this year. This comes on top of the closure of 13 regional offices and 900 job losses this year - saving around £45 million a year.